The Difficult Path for Trump’s ‘One Big Budget Bet’

The Hindu Editorial Analysis
11 August 2025

The Difficult Path for Trump’s ‘One Big Budget Bet’

(Source – The Hindu, International Edition – Page No. – 8)

Topic : GS Paper III: Economy | GS Paper II: Governance | International Relations

Context

The U.S. Department of Government Efficiency (DOGE) reform under Donald Trump aimed to streamline government functions, cut the deficit, and reduce the number of federal agencies. While its fiscal intent was strong, political disagreements, especially around the “One Big Beautiful Bill” (OBBB), have complicated its path.

Background

• Root Cause of U.S. Deficit & Debt:
  • Large public spending but comparatively small government size (36.49% of GDP on average, 2001–2024).
  • U.S. has the lowest ratio of government expenditure to GDP among major advanced economies (MAE).
  • Fiscal balance and debt burden remain high due to low revenue collection as a share of GDP.

DOGE’s Key Initiatives

1. Cost-Cutting & Efficiency Measures
   • Termination of unused federal office leases.
   • Cancellation of wasteful contracts.
   • Workforce optimization: hiring freezes, voluntary buyouts, reduction in overlaps.
   • Recovery of misallocated funds.
2. Technology-Driven Monitoring
   • AI-based tracking of employee productivity.
   • Identification of inefficiencies.
   • “Workforce Reshaping Tool” using Pentagon’s AutoRIF software to manage layoffs.
3. Transparency Measures
   • Public updates on savings via social media and DOGE’s portal.
   • Unconstitutionality Index (UI) tracking bureaucratic role in policy-making.
   • Grants payment transparency portal.
4. Impact
   • $190 billion in estimated savings from contract renegotiations and fraud detection.
   • Reduction in regulatory compliance costs ($3 billion saved).
   • Removal of 18 million words from federal regulations.

The Political Roadblock: OBBB

• What is OBBB?
  • Legislative extension of DOGE’s approach but with a contentious provision: removing tax credits for EV purchases.
• Conflict Point
  • Elon Musk, initially DOGE adviser, opposed OBBB due to its EV clause.
• Fiscal Challenge
  • OBBB’s tax cuts add $3.2 trillion to national debt over the next decade, countering DOGE’s deficit-reduction aim.

Global Context

• U.S. tax-to-GDP ratio is the lowest among MAEs.
• Lower effective tax rates on the rich and corporates, coupled with tighter secrecy laws, limit revenue growth.
• Other MAEs maintain higher government revenue, enabling better debt control.

Lessons & Implications for Governance

1. Fiscal Prudence Needs Revenue Boost
   • Spending cuts alone cannot fix deficits if tax collection remains weak.
2. Efficiency vs. Policy Conflicts
   • Administrative reforms fail when fiscal priorities clash with political agendas.
3. Technology in Governance
   • AI-based monitoring can significantly improve government productivity.
4. Global Benchmarking
   • Comparative analysis with other economies can guide better fiscal reforms.

Conclusion

The DOGE reforms show that governance efficiency is possible through technology, transparency, and rational expenditure cuts. However, without a balanced tax policy, such reforms risk being offset by politically motivated fiscal measures. For the U.S., the challenge remains not just cutting waste but ensuring sustainable revenue generation to address its deficit and debt.

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